Yes. I'm sorry, I should have provided a link to avoid this confusion:
http://en.wikipedia.org/wiki/Assassination_market
So its like life insurance limited to covering death by assassination?
That fantastic if you are rich in a libertarian paradise. You get the assassination insurance on someone you dislike and get paid when they die. You kill them. You own the court and you own the police. You won't be arrested and even if you were your employee, the prosecutor, would accept self-defence and drop the case.
Remind me again how this is an improvement on what we have now?
Because immediately afterwards, the peasants who are getting knocked off by this rich guy pool THEIR money together and kill HIM. The fact that he has most of the power, owns the cops, owns the law... Won't protect him.
Um no. He has the army. As Stalin said of the Pope, "How may divisions does he have?" If you can't defeat the army, you are dead. If you kill the leader, he will be replaced by his second in command. Its not realistic to arm people and hope that a shifty assassination will deter them from tyranny.
What you're describing sounds more like a dictator than a random rich person. Why would he even bother with anonymous markets when he can overtly order hits anyways? Besides, we don't even need assassination markets to deal with such blatant abuse of power - the Arab spring proved that.
But for fun let's run with this scenario. Let's say each peasant would gain 50 BTC worth of utility from "evil army loses City X" or something. They each bet 50 BTC that the evil army will hold the city. If the city falls, then it's a fair deal for everyone who lost money, their utility remains constant. If the army stands, the peasants are reimbursed and can bet again the next week/month/whenever. Meanwhile, Evil Dictator may bet against them to keep the potential profit margin down. He must choose between continually reimbursing peasants for their suffering, or gradually increasing chances of rebel attack.
http://en.wikipedia.org/wiki/Hama_massacre
This is what happens when real peasants bet against a real bastard with a militia. Indiscriminate slaughter followed by a generation of exploitation.
I'd ask you to contrast how police handle political opponents here and then see democracy is better than dictatorship.
Your scheme of allowing the rich to have their own armies, courts and police can end in one guy dominating an area exactly as thoroughly as Assad dominates Syria. So the potential downside is huge.
And I have yet to see a potential upside :S
No one used anonymous electronic markets in that village. They did not employ any technological capitalist solution similar to the one described here.
I'm not disputing that democracy is the best system, and certainly never meant to imply dictatorship even comes close, although I'm of the opinion that crypto-anarchy wouldn't be so bad. They might not even send political opponents to Guantanamo Bay to be tortured without trial.
The potential downside of representative democracy is that our representatives can be bought by corporations and wealthy people who write their own laws, strip away our freedoms, and poison the Earth. They are killing all of us right now. The potential upside of crypto-anarchy is to end that.